[8] 2002 e-business-strategies-for-virtual-organizations

Moving from e-business to i-business strategies in virtual markets
5.9.2 Eight steps for determining the
basis for differentiation
1 Determine who the real buyer is – the one or more specific
individuals, within the buying entity, who set the purchase
criteria.
2 Identify the buyer’s value chain – the value the firm
provides to the buyer is determined by the way, directly or
indirectly, it impacts upon the buyer’s value chain, either by
lowering costs or improving performance.
3 Determine and put in rank order the buyer’s reasons for
purchase – analysis of the buyer’s value chain will identify
such criteria which should then be ranked according to the
value the buyer attaches to each.
4 Assess the current and potential sources of differentiation –
by determining which of its value activities impact each of
the purchase criteria, a firm can identify its current or
potential sources of uniqueness.
5 Identify the cost of these sources of differentiation – the cost
of differentiation is a function of the cost drivers for those
activities that – distinguish a firm from its rivals.
6 Design the value chain to maximize value relative to cost –
the aim is to create the widest gap between what the buyer
will pay and the cost of providing it.
7 Test for sustainability – identify both stable sources of buyer
value and erecting barriers to competition.
8 Reduce costs in activities that do not affect the chosen forms
of differentiation.
Porter’s advance of this analysis foresaw the globalization of
businesses and industries and with it a shift from straightforward
growth as the main corporate objective to an era when
companies would need to identify and strengthen their competitive
position if they were to survive.
Porter’s identification of five competitive forces and his arguments
for positioning companies so as to reduce their impact
has become known as the ‘strategy as position’ school of
thought. As we have seen, understanding an enterprise in
terms of the value chains involved brings home to us the
centrality of communication systems in implementing any
business activity. It is the restructuring of value chains and the
reduction of costs of communicating between these activities
that keeps value chain analysis very much to the forefront of
enterprises today.
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